As the filing deadline looms, income tax professionals are urging residents to not delay.
According to Lorrie Tanquary, who co-owns the H&R Block office in Granby, people most often delay preparing their taxes because they’re afraid they owe money.
“The one thing I’d love for taxpayers to understand is the biggest penalty is failure to file,” she said. “File even if you can’t pay, or if you can’t pay immediately.”
The IRS notes on its website that a failure-to-file penalty is generally more than the failure-to-pay penalty. Usually, filing penalties are around 5 percent per month taxes are unpaid, while payment failure penalties are 0.5 to one percent per month. The IRS will work with taxpayers who have trouble making payments, like setting up installments.
As more and more taxpayers turn to software or online programs to help them prepare taxes, Tanquary said she’s also noticed more calls from people wanting free advice. But Tanquary urges those people to set up appointments to speak with tax professionals instead.
“It’s like calling the doctor and saying, ‘my left knee hurts, give me pain pills,’” she said. “It’s hard, really hard, when people ask a blind question with no context.”
Tanquary said that with those blind questions, she doesn’t know what software the taxpayer is using or their income complexities. Even when those individuals use H&R Block products, her office still uses specialized software, making it difficult for her to provide any advice. Tax preparation software and websites usually have toll-free customer service numbers customers can call for better assistance, she said.
She acknowledged these digital products are good tools for people with easy taxes. When taxpayers run into wrinkles, however, she said it’s best to consult a professional. They’re usually more up-to-speed on complex tax law, tax credits and deductions. They can also help if a taxpayer received a letter from the IRS or state after filing.
“It’s scary to get a letter … but they can make mistakes, too,” she said. “It’s good to have the assurance of someone who’s objective and will file a letter or send papers on your behalf.”
Fees for tax preparation at Tanquary’s office start at $80 ($40 for federal taxes and $40 for state taxes), but she said there are breaks available based on income.
The Health Care Act factor
Tanquary also said the biggest change taxpayers can expect will actually come next year, when the IRS begins assessing penalties for those without health insurance. For the 2014 tax year, that penalty will be $95. The following year, it’ll jump to $695 and keep rising annually after that.
“Right now, the Affordable Care Act is a law without a lot of teeth,” she said. “Your penalty of $100 is a lot less than the $2,400 you might pay for the year if you carry insurance. Although, if something happens to you, that’s the other piece.”
In an effort to remain objective, Tanquary’s office doesn’t provide advice on health insurance providers or the Affordable Care Act. Instead, she recommends taxpayers consult the Connect for Health Colorado website, or H&R Block’s health insurance advice website at helpth.com. As next year’s tax deadline looms, Tanquary said she isn’t sure how the IRS will figure out who’s insured and who isn’t.
“That’s out of my bailiwick,” she said. “It’s going to be between the insurers, the insured and the IRS.”
At this point, Tanquary can tell if taxpayers have insurance through their employers by looking at money being taken out in their W2 forms. Next year, if insurance payments aren’t being subtracted from paychecks, taxpayers might need to present some sort of insurance documentation.
“Down the road, the IRS might tell us they have to bring in a piece of paper and prove it,” she said. “We might be the police people, we really don’t know.”
Leia Larsen can be reached at 970-887-3334 ext. 19603.